The Rotorua District Council is supporting the transfer of the Lake Okaro bed to Te Arawa Lakes Trust, although it may be challenged.
Lake Okaro, about 25km south of Rotorua, was not part of the iwi's 2004 Treaty of Waitangi settlement with the Crown that saw Rotorua's lakes, with the exception of Lake Okaro and Lake Rotomahana, returned to the iwi.
At an extraordinary council meeting yesterday, the Te Arawa Lakes Trust met with councillors to discuss the lake.
Trust chief executive Roku Mihinui said there was likely to be a challenge from the hapu Ngati Whaoa if ownership of the lake bed was given to the trust.
"I have to be honest and say I'm unsure of what they would say of the ownership of the lake bed being invested in Te Arawa Lakes Trust," he said. Asked if the council needed to be mindful of Ngati Whaoa, Mr Mihinui said a legal opinion would need to be sought.
He said it would depend on the existing settlements and how binding they were, but if the transfer was to go through a public process, the hapu would have every right to lodge their own submission.
A number of councillors said ownership should have been resolved in the Treaty settlement stage and some suggested taking it back to central government.
Council chief executive Peter Guerin said one way of resolving the issue would be to amend the Te Arawa lakes settlement legislation which would use parliamentary resources and time, although it would "take forever".
"One thing that would be nice to know is why didn't the Crown deal with this? Possibly they didn't want to upset the people of Rotorua so left us to deal with it," he said.
Another issue to be dealt with was who would manage the reserve surrounding the lake; whether it should be managed separately by either party or in a co-management agreement.
Councillors voted unanimously to support the transfer of the Lake Okaro bed to the trust with guaranteed public access, that a request be made to the Crown for financial support and for advice to be sought on the most efficient way to go ahead with the transfer.